Other parts of this series:
Fintech as a trend is about 5 years old now. Financial instiutions have learned a lot in that time about how to get the most out of FinTech. Insurers can learn from banks how best to respond to the surge in investment in insurtech.
Soaring investment in financial services technology, fintech, presents insurers with a big challenge: How best to respond?
Such is the fast pace of change in the fintech sector, and its escalating impact on the financial services industry, that “wait and see” is not an option. Fortunately for insurers, other parts of the financial services business, notably retail banks, have already had to confront this challenge. Our report “The Future of Fintech and Banking”” identified three key responses that would enable banks to seize the opportunities presented by this surge in technology investment. They are:
- Act open: Engage with technology solutions providers and sources of knowledge, while also opening the organization’s intellectual property, assets and expertise to outside innovators. This will help insurers generate new ideas, change their organizational culture, attract skills and identify further areas for growth.
- Collaborate: Reach beyond the financial services industry to find partners that have different expertise and perspectives and can help identify new ways to generate value.
- Invest: Employ venture investing to develop and source innovative technology that will benefit the organization.
These responses are already proving successful in the banking industry. And they’ll work for insurers. It’s not necessary to choose a single response. One part of the business may opt for one response and a different part could choose another. What is essential, is that insurers devise a set of strategies that enable them to effectively respond to the growing influence of fintech. They should be clear and concise and take into account the insurer’s resources and market context. Ideally, they should have short, medium and long-term horizons. Key considerations include:
Short-term: Identify opportunities to improve business models by investing in digital technologies that are easily implemented. Ensure that the organization’s leadership is alert to the potential disruption that will be caused by emerging digital technologies.
Medium-term: Develop a comprehensive program that helps the organization research, purchase and implement the most effective digital technology. Put in place talent development and recruitment processes that will deliver the necessary skills to support the new digital technology.
Long-term: Reshape the business by building a digital ecosystem to provide customers with a wide range of highly-fluid financial products and services. Constantly challenge established business models and, if necessary, cannibalize short-term income to become more relevant to customers and gain access to larger, long-term, revenue pools.
The biggest challenge insurers will face during the fintech boom won’t come from nimble start-ups and service companies eager to raid established markets. It will come from inside their own organizations. Put simply: Insurers need to discover whether they are sufficiently nimble to seize the opportunities fintech will present.
For more information about the impact of fintech on insurers and other financial services firms take a look at these links. I’m sure you’ll find them useful.